<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only(as permitted by Rule
[_] Definitive Additional Materials 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
NEW ENGLAND ZENITH FUND
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] Fee computed on a table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange ActRule 0-11 (set forth the amount on which
the filing is calculated and state how it was determined):
---------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
-------------------------------------------------------------------
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------
<PAGE>
501 Boylston Street
Boston, Massachusetts 02116-3700
617-578-2000
LOGO THE NEW ENGLAND
Insurance and Investment
March 20, 1997
TO OWNERS OF NELICO'S VARIABLE LIFE INSURANCE POLICIES:
A Special Meeting of Shareholders of the Draycott International Equity
Series (the "Series") of the New England Zenith Fund will be held on
April 24, 1997. At the Shareholders Meeting, New England Life Insurance
Company ("NELICO") will vote all shares of the Series held in the New
England Variable Life Separate Account which are attributable to
NELICO's Variable Life Insurance Policies in accordance with
instructions received from Policy Owners. You are now being asked how
shares of the Series deemed attributable to your Policy should be voted
at the Shareholders Meeting.
Enclosed you will find a copy of the Notice of Meeting and Proxy
Statement relating to the Shareholders Meeting. After reviewing this
material, please complete and execute the Instruction Form and return it
in the enclosed, postage-paid, self-addressed envelope. If you fail to
return an executed Instruction Form, shares of the Series deemed
attributable to your Policy will be voted by NELICO in proportion to the
voting instructions received from all other NELICO Variable Life Policy
Owners.
<PAGE>
501 Boylston Street
Boston, Massachusetts 02116-3700
617-578-2000
LOGO THE NEW ENGLAND
Insurance and Investment
March 20, 1997
TO OWNERS OF NELICO'S VARIABLE LIFE INSURANCE POLICIES:
A Special Meeting of Shareholders of the Draycott International Equity
Series (the "Series") of the New England Zenith Fund will be held on
April 24, 1997. At the Shareholders Meeting, New England Life Insurance
Company ("NELICO") will vote all shares of the Series held in the New
England Variable Life Separate Account which are attributable to
NELICO's Variable Life Insurance Policies in accordance with
instructions received from Policy Owners. You are now being asked how
shares of the Series deemed attributable to your Policy should be voted
at the Shareholders Meeting. Under certain circumstances, however, plan
participants have the right to instruct Policy Owners as to how all or a
portion of the votes attributable to a Policy are to be cast, and Policy
Owners are required to cast such votes as instructed.
IN ORDER FOR THE VOTES UNDER YOUR POLICIES TO BE VOTED IN ACCORDANCE
WITH THE INSTRUCTIONS GIVEN BY YOU AND YOUR PLAN PARTICIPANTS, YOU MUST
RETURN A COMPLETED, EXECUTED INSTRUCTION FORM. If you fail to return an
executed Instruction Form, shares of the Series deemed attributable to
your Policies will be voted by NELICO in proportion to the voting
instructions received from all other Policy Owners.
Enclosed you will find a copy of the Notice of Meeting and Proxy
Statement relating to the Shareholders Meeting, as well as voting
instruction forms with the name of the plan participant entitled to
instruct the Policy Owner.
Please forward promptly (1) one Notice of Meeting and Proxy Statement
and (2) one Instruction Form to each person entitled to give voting
instructions. One Instruction Form is enclosed for each Policy under
which votes are subject to instruction.
The Instruction Form is to be used by each plan participant to convey
instructions to you as Policy Owner. INSTRUCTION FORMS COMPLETED BY YOUR
PLAN PARTICIPANTS SHOULD NOT BE RETURNED. AFTER YOU HAVE RECEIVED
INSTRUCTIONS FROM A PLAN PARTICIPANT, YOU SHOULD TRANSFER THESE
INSTRUCTIONS TO THE PLAN PARTICIPANT LISTING PROVIDED. RETURN ONLY THE
SINGLE INSTRUCTION FORM IN YOUR NAME, SIGNED BY YOU, ALONG WITH THE
APPROPRIATELY CHECKED PLAN PARTICIPANT LIST.
If no plan participants transmit voting instructions, or if the plan
participants do not have the right to instruct, cast all votes at your
sole discretion by completing and signing the Instruction Form.
In order to cast votes under the Policies, you must return an
INSTRUCTION FORM signed by you, the Policy Owner.
If you have any questions concerning these procedures, please call
collect, Peter Zucker, Consultant, New England Life Insurance Company
(617) 578-3566.
<PAGE>
501 Boylston Street
Boston, Massachusetts 02116-3700
617-578-2000
LOGO NEW ENGLAND ANNUITIES
A Business Unit of The New England
March 20, 1997
TO OWNERS OF ZENITH ACCUMULATOR VARIABLE ANNUITY CONTRACTS:
A Special Meeting of Shareholders of the Draycott International
Equity Series (the "Series") of the New England Zenith Fund will be
held on April 24, 1997. At the Shareholders Meeting, Metropolitan
Life Insurance Company ("MetLife") will vote all shares of the
Series held in The New England Variable Account which are
attributable to Zenith Accumulator Variable Annuity Contracts in
accordance with instructions received from Contractholders. You are
now being asked how shares of the Series deemed attributable to your
Contract should be voted at the Shareholders Meeting.
Enclosed you will find a copy of the Notice of Meeting and Proxy
Statement relating to the Shareholders Meeting. After reviewing this
material, please complete and execute the Instruction Form and
return it in the enclosed, postage-paid, self-addressed envelope. If
you fail to return an executed Instruction Form, shares of the
Series deemed attributable to your Contract will be voted by MetLife
in proportion to the voting instructions received from all other
Zenith Accumulator Contractholders.
<PAGE>
501 Boylston Street
Boston, Massachusetts 02116-3700
617-578-2000
LOGO NEW ENGLAND ANNUITIES
A Business Unit of The New England
March 20, 1997
TO OWNERS OF ZENITH ACCUMULATOR VARIABLE ANNUITY CONTRACTS:
A Special Meeting of Shareholders of the Draycott International
Equity Series (the "Series") of the New England Zenith Fund will be
held on April 24, 1997. At the Shareholders Meeting, Metropolitan
Life Insurance Company ("MetLife") will vote all shares of the
Series held in The New England Variable Account which are
attributable to Zenith Accumulator Variable Annuity Contracts in
accordance with instructions received from Contractholders. You are
now being asked how shares of the Series deemed attributable to your
Contract should be voted at the Shareholders Meeting. Under certain
circumstances, however, annuitants have the right to instruct
Contractholders as to how all or a portion of the votes attributable
to a Contract are to be cast, and Contractholders are required to
cast such votes as instructed.
IN ORDER FOR THE VOTES UNDER YOUR CONTRACTS TO BE VOTED IN
ACCORDANCE WITH THE INSTRUCTIONS GIVEN BY YOU AND YOUR ANNUITANTS,
YOU MUST RETURN A COMPLETED, EXECUTED INSTRUCTION FORM. If you fail
to return an executed Instruction Form, shares of the Series deemed
attributable to your Contracts will be voted by MetLife in
proportion to the voting instructions received from all other Zenith
Accumulator Contractholders.
Enclosed you will find a copy of the Notice of Meeting and Proxy
Statement relating to the Shareholders Meeting, as well as voting
instruction forms with the name of the annuitant entitled to
instruct the Contractholder.
Please forward promptly (1) one Notice of Meeting and Proxy
Statement and (2) one Instruction Form to each person entitled to
give voting instructions. One Instruction Form is enclosed for each
Contract under which votes are subject to instruction.
The Instruction Form is to be used by each annuitant to convey
instructions to you as Contractholder. INSTRUCTION FORMS COMPLETED
BY YOUR ANNUITANTS SHOULD NOT BE RETURNED. AFTER YOU HAVE RECEIVED
INSTRUCTIONS FROM AN ANNUITANT, YOU SHOULD TRANSFER THESE
INSTRUCTIONS TO THE ANNUITANT LISTING PROVIDED. RETURN ONLY THE
SINGLE INSTRUCTION FORM IN YOUR NAME, SIGNED BY YOU, ALONG WITH THE
APPROPRIATELY CHECKED ANNUITANT LIST.
If no annuitants transmit voting instructions, or if the annuitants
do not have the right to instruct, cast all votes at your sole
discretion by completing and signing the Instruction Form.
In order to cast votes under the Contracts, you must return an
INSTRUCTION FORM signed by you, the Contract Owner.
If you have any questions concerning these procedures, please call
collect, Peter Zucker, Consultant, New England Life Insurance
Company (617) 578-3566.
<PAGE>
501 Boylston Street
Boston, Massachusetts 02116-3700
617-578-2000
LOGO NEW ENGLAND ANNUITIES
A Business Unit of The New England
March 20, 1997
TO OWNERS OF NELICO'S VARIABLE ANNUITY CONTRACTS:
A Special Meeting of Shareholders of the Draycott International Equity
Series (the "Series") of the New England Zenith Fund will be held on April
24, 1997. At the Shareholders Meeting, New England Life Insurance Company
("NELICO") will vote all shares of the Series held in the New England
Variable Annuity Separate Account which are attributable to NELICO's
Variable Annuity Contracts in accordance with instructions received from
Contractholders. You are now being asked how shares of the Series deemed
attributable to your Contract should be voted at the Shareholders Meeting.
Enclosed you will find a copy of the Notice of Meeting and Proxy Statement
relating to the Shareholders Meeting. After reviewing this material,
please complete and execute the Instruction Form and return it in the
enclosed, postage-paid, self-addressed envelope. If you fail to return an
executed Instruction Form, shares of the Series deemed attributable to
your Contract will be voted by NELICO in proportion to the voting
instructions received from all other NELICO Variable Annuity
Contractholders.
<PAGE>
NEW ENGLAND ZENITH FUND
DRAYCOTT INTERNATIONAL EQUITY SERIES
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
April 24, 1997
To the Shareholders:
Notice is hereby given that a Special Meeting of Shareholders of the
Draycott International Equity Series (the "Series"), a series of New England
Zenith Fund, will be held at the offices of New England Life Insurance
Company, 501 Boylston Street, 9th Floor, Boston, Massachusetts 02116, on
Thursday, April 24, 1997 at 10:00 a.m. Boston time, for the following
purposes:
1. To approve or disapprove a new Sub-Advisory Agreement (the "New Sub-
Advisory Agreement") relating to the Series by and between TNE
Advisers, Inc. and Morgan Stanley Asset Management Inc. ("MSAM").
2. To approve or disapprove a second new Sub-Advisory Agreement relating
to the Series by and between TNE Advisers, Inc. and MSAM, such Sub-
Advisory Agreement to replace the New Sub-Advisory Agreement at the
time of the merger of MSAM's parent company, Morgan Stanley Group
Inc., with and into Dean Witter, Discover & Co., and to be identical,
except for its date, to the New Sub-Advisory Agreement.
3. To consider and act upon any other matters which may properly come
before the meeting or any adjournment thereof.
By order of the President,
Beverly J. DeWitt, Secretary
March 20, 1997
- -------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
- -------------------------------------------------------------------------------
PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED INSTRUCTION FORM PROMPTLY
IN THE ENCLOSED POSTAGE- PAID ENVELOPE WHETHER OR NOT YOU PLAN TO BE PRESENT
AT THE MEETING. YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
<PAGE>
NEW ENGLAND ZENITH FUND
DRAYCOTT INTERNATIONAL EQUITY SERIES
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees of New England Zenith Fund (the "Trust") for
use at the Special Meeting of Shareholders of the Draycott International
Equity Series (the "Series"), a series of the Trust, to be held at the offices
of New England Life Insurance Company ("NELICO"), 501 Boylston Street, 9th
Floor, Boston, Massachusetts 02116, on Thursday, April 24, 1997 at 10:00 a.m.
Boston time, and at any adjournment or adjournments thereof (the "Meeting").
This Proxy Statement and its enclosures are being mailed to shareholders
beginning on or about March 24, 1997. A copy of the Annual Report of the Trust
for the fiscal year ended December 31, 1996 may be obtained without charge by
writing to NELICO at the above address or by calling (800) 356-5015.
All shareholders of record of the Series on February 28, 1997, the record
date for determining shareholders entitled to vote at the Meeting (the "Record
Date"), are entitled to one vote for each share of beneficial interest of the
Series held as of that date. The number of shares of beneficial interest of
the Series issued and outstanding as of the Record Date was 3,533,716.
Timely, properly executed proxies will be voted as you instruct. If no
choice is indicated, proxies will be voted in favor of Proposals 1 and 2 set
forth in the attached Notice of Meeting. At any time before it has been voted,
the enclosed proxy may be revoked by the signer by a written revocation
received by the Secretary of the Trust, by properly executing a later-dated
proxy or by attending the Meeting, requesting return of any previously
delivered proxy and voting in person.
The costs of solicitation of proxies, to the extent that they relate to
Proposal 1, will be borne by the Series. To the extent that such costs relate
to Proposal 2, such costs will be borne by Morgan Stanley Asset Management
Inc. ("MSAM") or its affiliates, and not by the Series. Solicitation of
proxies by personal interview, mail, telephone and telegraph may be made by
officers and Trustees of the Trust and employees of NELICO, TNE Advisers, Inc.
("TNE Advisers") and New England Securities Corporation.
The Trustees have approved, and recommend that the shareholders of the
Series approve, a new Sub-Advisory Agreement for the Series (the "New Sub-
Advisory Agreement") between TNE Advisers and MSAM (Proposal 1). The New Sub-
Advisory Agreement, the form of which is attached to this Proxy Statement as
1
<PAGE>
Appendix A, is substantially similar to the Sub-Advisory Agreement currently
in effect for the Series (the "Current Sub-Advisory Agreement") between TNE
Advisers and Draycott Partners, Ltd. ("Draycott"), except: (i) references to
Draycott have been changed to references to MSAM, (ii) the New Sub-Advisory
Agreement provides for a different sub-advisory fee rate payable by TNE
Advisers to MSAM than is payable by TNE Advisers to Draycott under the Current
Sub-Advisory Agreement, and (iii) certain other, minor differences.
The Trustees have also approved, and recommend that shareholders of the
Series approve, a second new Sub-Advisory Agreement for the Series between TNE
Advisers and MSAM (the "Post-Merger Sub-Advisory Agreement") to take effect
following the merger (the "Merger") of MSAM's parent company, Morgan Stanley
Group Inc. ("Morgan Stanley"), with and into Dean Witter, Discover & Co.
("Dean Witter Discover") (Proposal 2). The terms of the Post-Merger Sub-
Advisory Agreement are identical, except for the date, to the terms of the New
Sub-Advisory Agreement. As a result, if the Series' shareholders approve
Proposals 1 and 2, MSAM will continue to perform sub-advisory services for the
Series after the Merger under the Post-Merger Sub-Advisory Agreement on the
same terms as are in effect immediately before the Merger.
ADVISORY AGREEMENT
TNE Advisers has acted as the Series' adviser since the Series' inception on
October 31, 1994, and currently acts as the Series' adviser pursuant to an
Advisory Agreement dated August 30, 1996 (the "Advisory Agreement"). The
Trustees of the Trust approved the Advisory Agreement at a meeting held on
November 13, 1995, and the Series' shareholders approved the Advisory
Agreement at a meeting held on December 28, 1995. The purpose of the
submission of the Advisory Agreement for shareholder approval at such time was
to approve its continuance following a change in control of TNE Advisers in
connection with the merger of TNE Advisers' (and NELICO's) former parent
company, New England Mutual Life Insurance Company, with and into Metropolitan
Life Insurance Company ("MetLife"), with MetLife as the surviving company,
which merger was consummated on August 30, 1996.
Under the Advisory Agreement, TNE Advisers has overall advisory and
administrative responsibility with respect to the Series. The Advisory
Agreement also provides that TNE Advisers will, subject to its rights to
delegate such responsibilities to other parties, provide to the Series both
portfolio management services and administrative services. TNE Advisers has
subcontracted with its affiliate New England Funds, L.P. to provide, at no
extra cost to the Series, certain administrative services to the Series. The
address of New England Funds, L.P. is 399 Boylston Street, Boston,
Massachusetts 02116. Under the Advisory Agreement, the annual management fee
payable by the Series to TNE Advisers is 0.90% of the Series' average daily
net assets. Prior to August 30, 1996, TNE
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<PAGE>
Advisers provided the same services and the Series paid TNE Advisers a
management fee at the same annual rate under a previous Advisory Agreement.
For the fiscal year ended December 31, 1996, the aggregate management fee
payable by the Series to TNE Advisers under the Advisory Agreement (and its
predecessor) was $256,659 (without taking into account the expense deferral
arrangements described below). The Proposals described in this Proxy Statement
would not affect the Advisory Agreement or the management fee payable by the
Series to TNE Advisers.
EXPENSE DEFERRAL ARRANGEMENT
Pursuant to an expense deferral agreement in effect since the Series'
inception on October 31, 1994 between the Trust and TNE Advisers, which
agreement TNE Advisers may terminate at any time, TNE Advisers has agreed to
pay the expenses of the Series (exclusive of any brokerage costs, interest,
taxes or extraordinary expenses) in excess of 1.30% annually of the Series'
average daily net assets, subject to the obligation of the Series to repay
such amounts to TNE Advisers in future years, if any, when the Series'
expenses fall below 1.30% annually of the Series' average daily net assets,
such repayment to be made to the extent that it does not cause the total
expenses in such year to exceed 1.30% annually of such assets; provided,
however, that the Series is not obligated to repay any expense paid by TNE
Advisers more than two years after the end of the fiscal year in which such
expense was incurred. Under the expense deferral agreement, TNE Advisers paid
$102,652 of expenses relating to the Series for the fiscal year ended December
31, 1996. TNE Advisers may at any time terminate its obligations under the
expense deferral agreement to bear future expenses of the Series, but any
expenses that were deferred while the Series' expense limit was in place can
never be charged to the Series unless the Series' expenses fall below the
limit. It is anticipated that this expense deferral agreement will continue
after the New Sub-Advisory Agreement and the Post-Merger Sub-Advisory
Agreement each take effect.
CURRENT SUB-ADVISORY AGREEMENT
TNE Advisers has delegated to Draycott its responsibility under the Advisory
Agreement to provide portfolio management services to the Series. Draycott's
address is 53 Stratton Street, London W1X 6JJ, England. Draycott has acted as
the Series' sub-adviser since the Series' inception on October 31, 1994, and
currently acts as the Series' sub-adviser pursuant to the Current Sub-Advisory
Agreement, which is dated August 30, 1996. The Current Sub-Advisory Agreement
requires Draycott to manage the investment and reinvestment of the assets of
the Series, subject to the supervision of TNE Advisers and oversight by the
Trustees. Draycott is authorized to effect portfolio transactions for the
Series, using its own discretion and without prior consultation with TNE
Advisers. Draycott is required to report periodically to TNE Advisers, its
agents and the Trustees of the Trust. Under the Current Sub-Advisory
Agreement, the annual sub-advisory fee payable by TNE
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<PAGE>
Advisers to Draycott, as compensation for all services rendered, facilities
furnished and expenses borne by Draycott, is 0.75% of the first $10 million of
the Series' average daily net assets, 0.60% of the next $40 million of such
assets and 0.45% of such assets in excess of $50 million. Prior to August 30,
1996, Draycott provided the same services and TNE Advisers paid Draycott fees
at the same annual rates under a series of previous Sub-Advisory Agreements
containing similar provisions. For the fiscal year ended December 31, 1996,
the aggregate sub-advisory fee paid by TNE Advisers to Draycott under the
Current Sub-Advisory Agreement (and its predecessors) was $186,106.
The Current Sub-Advisory Agreement was approved by the Trust's Trustees at a
meeting held on November 13, 1995, and was approved by the Series'
shareholders at a meeting held on December 28, 1995. The purpose of the
submission of the Current Sub-Advisory Agreement for shareholder approval at
such time was to approve its continuance following successive changes in
control of Draycott and TNE Advisers.
APPOINTMENT OF MSAM AS SUB-ADVISER
Based on a review of the investment approach used by Draycott in managing
the Series' portfolio, the Series' performance record under Draycott's
management, the performance record of MSAM in managing international equity
accounts and the performance of other international equity funds, TNE Advisers
recommended and the Trustees of the Trust determined that it would be
appropriate for MSAM to assume responsibility for the day-to-day management of
the Series' portfolio. Thus, on January 22, 1997, the Trustees approved the
termination by TNE Advisers of the Current Sub-Advisory Agreement and approved
the New Sub-Advisory Agreement between TNE Advisers and MSAM. The New Sub-
Advisory Agreement is subject to the approval of the Series' shareholders.
Assuming that the New Sub-Advisory Agreement is approved by the Series'
shareholders, the Current Sub-Advisory Agreement will terminate, and the New
Sub-Advisory Agreement will take effect, on or about May 1, 1997, at which
time MSAM will begin acting as the Series' sub-adviser. The Trustees
unanimously recommend that shareholders approve the New Sub-Advisory
Agreement.
The investment objective of the Series is currently to seek total return
from long-term growth of capital and dividend income, primarily through
investment in international equity securities. If MSAM becomes sub-adviser of
the Series, the Series would continue to invest primarily in international
equity securities; however, the Series' investment objective would be long-
term capital appreciation, with the production of any current income
incidental to this objective. If the New Sub-Advisory Agreement is approved,
the countries in which the Series may invest will be those represented in the
Morgan Stanley Capital International EAFE Index (the "EAFE Index"), which
includes Australia, Japan, New Zealand, most of the nations in Western Europe
and certain developed countries in Asia, such as Hong
4
<PAGE>
Kong and Singapore. As is currently the case, under normal circumstances at
least 65% of the total assets of the Series would be invested in equity
securities of issuers in at least three different countries outside the United
States.
In determining to approve the appointment of MSAM as sub-adviser to the
Series and to recommend the New Sub-Advisory Agreement for shareholder
approval, the Trustees considered the qualifications of MSAM and its personnel
to provide portfolio management services to the Series. The Trustees also
reviewed information about MSAM's proprietary "International Magnum"
investment style, which MSAM proposes to use in managing the Series'
portfolio. Under this style, MSAM first makes a regional allocation decision
through its Asset Allocation Committee in New York. This determination is made
based on projections of comparative interest rates, currencies, corporate
profits and economic growth among the various regions represented in the EAFE
Index. Once that decision is made, funds are allocated to portfolio managers
responsible for each of the three regions in the EAFE Index: Europe, Japan,
and Asia excluding Japan. The portfolio managers in each of those areas then
decide on the specific stocks that will be purchased. The entire process is
controlled and monitored by a portfolio management team in New York that is
headed by Francine J. Bovich, Principal of MSAM. Ms. Bovich is the chief
portfolio manager for the International Magnum style and would, if the New
Sub-Advisory Agreement is approved, have primary responsibility for the
management of the Series' portfolio. Prior to joining MSAM in 1993, Ms. Bovich
was Principal and Executive Vice President of Westwood Management Corp., a
registered investment adviser.
In connection with the change of sub-adviser, the Series' name would be
changed to the "Morgan Stanley International Magnum Equity Series."
In recommending the appointment of MSAM as the Series' sub-adviser and the
approval of the New Sub-Advisory Agreement, the Trustees also considered
extensive information about the Series, MSAM and MSAM's proposed approach to
managing the Series' portfolio, including information about MSAM's and Morgan
Stanley's organizational structure, investment and legal and compliance
personnel, compliance procedures and financial condition. The Trustees also
considered MSAM's policies for placing portfolio transactions of the Series
with broker-dealers affiliated with MSAM and broker-dealers that furnish
brokerage and research services to MSAM, as described below under "Portfolio
Transactions and Brokerage." The Trustees also took into account MSAM's
substantial experience and reputation as a manager of international equity
investments, and the prominence of the Morgan Stanley name in the marketplace
for financial products and services, as possible factors which might enhance
the marketability of the insurance products that invest in the Series, and
thus lead to growth in the size of the Series, although such growth cannot be
assured.
The Trustees also considered possible benefits to MSAM that may result from
the New Sub-Advisory Agreement, including, as noted above, the possible use by
5
<PAGE>
the Series of MSAM's affiliate, Morgan Stanley & Co. Incorporated ("Morgan
Stanley & Co."), a registered broker-dealer and investment adviser, and its
affiliates, to the extent permitted by law, for brokerage services. The
Trustees also considered other effects on the Series of MSAM's affiliation
with Morgan Stanley & Co. After the New Sub-Advisory Agreement takes effect,
the Investment Company Act of 1940, as amended (the "1940 Act"), will prohibit
or impose certain conditions on the ability of the Series to engage in certain
transactions with Morgan Stanley & Co. and its affiliates. For example, the
Series will be prohibited from purchasing securities from Morgan Stanley & Co.
in transactions in which Morgan Stanley & Co. acts as principal. The Series
will also have to satisfy certain conditions in order to engage in securities
transactions in which Morgan Stanley & Co. is acting as an underwriter. In
this connection, management of MSAM represented to the Trustees that they do
not believe these prohibitions or conditions will have a material effect on
the management or performance of the Series.
The Trustees also considered, at a meeting held on March 4, 1997,
information about the Merger between Morgan Stanley and Dean Witter Discover,
as described further below under "Merger of Morgan Stanley and Dean Witter
Discover," and reconfirmed their earlier approval of the New Sub-Advisory
Agreement. Based on this review, the Trustees concluded that it is appropriate
and desirable for MSAM to assume responsibility for the management of the
Series' portfolio under the New Sub-Advisory Agreement.
The International Magnum style is similar to the approach followed by
Draycott in managing the Series' portfolio, in that both start with a top-down
approach to asset allocation (that is, the allocation of assets to regions or
countries, followed by the selection of individual stocks within those regions
or countries), both do not include emerging markets, and both invest primarily
in larger capitalization stocks. However, MSAM has informed the Trust that, if
the New Sub-Advisory Agreement is approved by the Series' shareholders, MSAM
would expect to restructure the Series' portfolio to reflect MSAM's judgments
as to regional weightings and stock selection. MSAM expects that the costs of
this restructuring, which would be paid by the Series, would not exceed 2% of
the Series' net asset value. Based on the Series' net asset value at February
28, 1997, these estimated costs would not be in excess of $770,000. There can
be no assurance that actual costs would not be significantly higher or lower
than this estimate. Restructuring costs will consist primarily of brokerage
fees and dealer spreads or markups related to purchasing and selling
securities for the Series' portfolio. These amounts are treated as capital
items, rather than operating expenses. They will thus reduce the Series' net
asset value, rather than increase its operating expenses. The costs of holding
the Meeting, estimated at $65,000, are in addition to these restructuring
costs and will be borne in part by the Series, as described above, regardless
of whether the proposed New Sub-Advisory Agreement is approved.
6
<PAGE>
DESCRIPTION OF THE NEW SUB-ADVISORY AGREEMENT
The form of the New Sub-Advisory Agreement is attached to this Proxy
Statement as Appendix A. The following summary description of the New Sub-
Advisory Agreement is qualified in its entirety by reference to the full text
of the form of the Agreement.
The proposed New Sub-Advisory Agreement requires MSAM to manage the
investment and reinvestment of the assets of the Series, subject to the
supervision of TNE Advisers. Under the terms of the New Sub-Advisory
Agreement, MSAM is authorized to effect portfolio transactions for the Series
in the discretion of MSAM and without prior consultation with TNE Advisers.
MSAM is required to report periodically to TNE Advisers, its agents and the
Trustees of the Trust. TNE Advisers will compensate MSAM at an annual rate of
0.75% of the first $30 million of the Series' average daily net assets, 0.60%
of the next $40 million of such assets, 0.45% of the next $30 million of such
assets and 0.40% of such assets in excess of $100 million.
The New Sub-Advisory Agreement provides that it will continue in effect for
two years from its date of execution, and from year to year thereafter so long
as such continuance is specifically approved at least annually (i) by the
Board of Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series, and (ii) by vote of a majority of the
Trustees who are not "interested persons," as that term is defined in the 1940
Act, of the Trust, TNE Advisers or MSAM, cast in person at a meeting called
for the purpose of voting on such approval. Any amendment to the New Sub-
Advisory Agreement must be approved by TNE Advisers and MSAM and, if required
by law, by vote of a majority of the Trustees who are not interested persons
of the Trust, TNE Advisers or MSAM, cast in person at a meeting called for the
purpose of voting on such approval, and/or by vote of a majority of the
outstanding voting securities of the Series. The New Sub-Advisory Agreement
may be terminated without penalty by vote of the Board of Trustees of the
Trust, including a majority of the Trustees who are not interested persons of
the Trust, TNE Advisers or MSAM, or by vote of a majority of the outstanding
voting securities of the Series, upon sixty days' written notice to MSAM, by
MSAM upon sixty days' written notice to TNE Advisers and the Trust or, if
approved by the Board of Trustees of the Trust, by TNE Advisers upon sixty
days' written notice to MSAM, and it terminates automatically in the event of
its assignment or upon the termination of the Advisory Agreement. In addition,
the New Sub-Advisory Agreement will automatically terminate if MSAM requires
the Series to change its name so as to eliminate all references to the word
"Morgan Stanley," unless the continuance of the New Sub-Advisory Agreement
after such change shall have been specifically approved by vote of a majority
of the outstanding voting securities of the Series and by vote of a majority
of the Trustees of the Trust, including a majority of the Trustees who are not
interested persons of the Trust or MSAM, cast in person at a meeting called
for the purpose of voting on
7
<PAGE>
such approval. The New Sub-Advisory Agreement provides that MSAM shall not be
subject to any liability in connection with the performance of its services
thereunder in the absence of willful misfeasance, bad faith or gross
negligence in the performance of MSAM's duties or by reason of reckless
disregard by MSAM of its obligations and duties thereunder. The New Sub-
Advisory Agreement requires that the Series change its name so as to delete
any reference to "Morgan Stanley" in the event that MSAM or an affiliate
thereof no longer serves as sub- adviser to the Series.
COMPARISON OF THE CURRENT AND NEW SUB-ADVISORY AGREEMENTS
The proposed New Sub-Advisory Agreement for the Series is substantially
similar to the Current Sub-Advisory Agreement, except that, under the New Sub-
Advisory Agreement:
. MSAM would become responsible for the day-to-day management of the
Series' investment operations, succeeding Draycott.
. MSAM would be entitled to receive a sub-advisory fee, paid by TNE
Advisers, at the annual rate of 0.75% of the first $30 million of the
Series' average daily net assets, 0.60% of the next $40 million of
such assets, 0.45% of the next $30 million of such assets and 0.40% of
such assets in excess of $100 million. Under the Current Sub-Advisory
Agreement, TNE Advisers pays Draycott a sub-advisory fee at the annual
rate of 0.75% of the first $10 million of the Series' average daily
net assets, 0.60% of the next $40 million of such assets and 0.45% of
such assets in excess of $50 million. As of February 28, 1997, the
Series' net assets were $38,413,970. As noted above, for the fiscal
year ended December 31, 1996, TNE Advisers paid sub-advisory fees of
$186,106 to Draycott. If the New Sub-Advisory Agreement had been in
effect during 1996, TNE Advisers would have paid sub-advisory fees of
$213,883 to MSAM, or 14.93% more than the sub-advisory fees paid to
Draycott. All sub-advisory fees under both the Current Sub-Advisory
Agreement and the New Sub-Advisory Agreement are paid by TNE Advisers,
and not by the Series. Thus, the differences between the two Sub-
Advisory Agreements do not affect the fees paid by the Series. As
noted above, the Series pays TNE Advisers a management fee at the
annual rate of 0.90% of the Series' average daily net assets.
As explained above, although the terms of the two Sub-Advisory Agreements
are substantially similar except as noted, MSAM will follow a somewhat
different approach to managing the Series' portfolio than that currently being
followed by Draycott, and the Series' investment objective will be
correspondingly revised.
MERGER OF MORGAN STANLEY AND DEAN WITTER DISCOVER
On February 5, 1997, Morgan Stanley and Dean Witter Discover entered into an
Agreement and Plan of Merger (the "Merger Agreement"). Pursuant to the
8
<PAGE>
Merger Agreement, Morgan Stanley will be merged with and into Dean Witter
Discover, and the surviving corporation will be named Morgan Stanley, Dean
Witter, Discover & Co. ("MSDWD"). Following the Merger, MSAM will be a wholly-
owned subsidiary of MSDWD.
Under the terms of the Merger Agreement, each of Morgan Stanley's common
shares will be converted into the right to receive 1.65 shares of MSDWD common
stock and each issued and outstanding share of Dean Witter Discover common
stock will remain outstanding and will thereafter represent one share of MSDWD
common stock. Following the Merger, Morgan Stanley's former shareholders will
own approximately 45% and Dean Witter Discover's shareholders will own
approximately 55% of the outstanding shares of common stock of MSDWD.
The Merger is expected to be consummated in mid-1997 and is subject to
certain closing conditions, including certain regulatory approvals and the
approval of shareholders of both Morgan Stanley and Dean Witter Discover.
The Board of Directors of MSDWD will initially consist of fourteen members,
two of whom will be Morgan Stanley insiders and two of whom will be Dean
Witter Discover insiders. The remaining ten directors will be independent
directors, with Morgan Stanley and Dean Witter Discover each nominating five
of the ten. The Chairman and Chief Executive Officer of MSDWD will be the
current Chairman and Chief Executive Officer of Dean Witter Discover, Phillip
Purcell. The President and Chief Operating Officer of MSDWD will be the
current President of Morgan Stanley, John Mack.
MSAM has informed the Trust that it does not anticipate any reduction as a
result of the Merger in the quality of services rendered to the Series, and
does not expect that the Merger will result in any material changes in the
business of MSAM or in the manner in which MSAM renders services to the
Series. MSAM has also informed the Trust that it does not anticipate that the
Merger will have any adverse effect on MSAM's ability to fulfill its
obligations under the Post-Merger Sub-Advisory Agreement or to operate its
business in a manner consistent with past business practice.
POST-MERGER SUB-ADVISORY AGREEMENT
The Trustees of the Trust have unanimously approved the Post-Merger Sub-
Advisory Agreement for the Series and unanimously recommend that the
shareholders of the Series approve the Post-Merger Sub-Advisory Agreement. The
Post-Merger Sub-Advisory Agreement would take effect upon the later to occur
of (i) the obtaining of shareholder approval or (ii) the closing of the
Merger. The terms of the Post-Merger Sub-Advisory Agreement will be identical
to the terms of the New Sub-Advisory Agreement, which is expected to take
effect on or about
9
<PAGE>
May 1, 1997. The only difference will be the dates of the two agreements. The
Post-Merger Sub-Advisory Agreement will continue in effect for an initial two-
year term and thereafter for successive annual periods as long as such
continuance is approved by the Trustees or the shareholders as provided
therein.
In coming to their recommendation, the Trustees reviewed information about
MSAM, Morgan Stanley, Dean Witter Discover and the terms of the Merger. The
Trustees also considered the effect that the Merger would have on the matters
that the Trustees considered in approving the New Sub-Advisory Agreement.
In evaluating the Post-Merger Sub-Advisory Agreement, the Board took into
account that the New Sub-Advisory Agreement and the Post-Merger Sub-Advisory
Agreement, including their terms relating to the services to be provided
thereunder by MSAM and the fees and expenses payable by TNE Advisers, are
identical, except for their dates. The Trustees also considered other possible
benefits to MSAM and MSDWD that may result from the Merger, including the
possible use by the Series of MSDWD's affiliate, Dean Witter Reynolds Inc.
("DWR"), a registered broker-dealer, and its affiliates, to the extent
permitted by law, for brokerage services.
The Trustees also considered the terms of the Merger Agreement and the
possible effects of the Merger upon MSAM's organization and upon the ability
of MSAM to provide sub-advisory services to the Series, and the Trustees were
informed of the resources of MSDWD to be made available to MSAM following the
Merger. The terms of the Merger Agreement do not provide for any changes,
other than changes in the ordinary course of business, in the management,
operation, personnel or legal structure of MSAM. The MSAM personnel who
currently provide advisory and other services to MSAM's International Magnum
advisory accounts, which will include the Series after the New Sub-Advisory
Agreement takes effect, are not expected to change as a result of the Merger.
The Trustees also considered the effect on the Series of MSAM's becoming an
affiliated person of MSDWD. Following the Merger, the 1940 Act will prohibit
or impose certain conditions on the ability of the Series to engage in certain
transactions with MSDWD and its affiliates. For example, the Series will be
prohibited from purchasing securities from DWR, as well as Morgan Stanley &
Co., in transactions in which DWR (or Morgan Stanley & Co.) acts as principal.
The Series will also have to satisfy certain conditions in order to engage in
securities transactions in which DWR, as well as Morgan Stanley & Co., is
acting as an underwriter. Management of MSAM have represented to the Trust
that they do not believe these prohibitions or conditions will have a material
effect on the management or performance of the Series.
After consideration of the above factors and such other factors and
information as the Trustees deemed relevant, the Trustees concluded that it is
appropriate and desirable for MSAM to continue, after the Merger, to act as
sub-
10
<PAGE>
adviser to the Series on the same terms as are in effect immediately before
the Merger. Accordingly, the Trustees unanimously recommend that shareholders
approve the Post-Merger Sub-Advisory Agreement.
In the event that the Merger is not consummated, MSAM would continue to
serve as sub-adviser to the Series pursuant to the New Sub-Advisory Agreement
(assuming it has been approved by shareholders).
INFORMATION ABOUT THE TRUST
The Trust is a diversified, open-end management investment company organized
in 1987 as a business trust under the laws of Massachusetts. The Trust is a
series type company with fourteen investment portfolios. The Series is one of
those portfolios. Shares in the Trust are not offered directly to the general
public, and currently are available only to separate accounts established by
NELICO, MetLife or subsidiaries of MetLife as an investment vehicle for
variable life insurance or variable annuity products, although not all of the
Trust's series may be available to all separate accounts. The address of the
Trust is 501 Boylston Street, Boston, Massachusetts 02116. New England
Securities Corporation, 399 Boylston Street, Boston, Massachusetts, 02116, is
the principal underwriter of the Trust.
INFORMATION ABOUT TNE ADVISERS
TNE Advisers is a wholly-owned subsidiary of New England Life Holdings,
Inc., which is a wholly-owned subsidiary of NELICO, which in turn is a wholly-
owned subsidiary of MetLife New England Holdings, Inc. ("MetLife Holdings").
MetLife Holdings is wholly owned by MetLife, a mutual insurance company. TNE
Advisers acts as adviser to all of the series of the Trust except the Capital
Growth Series. The Chairman and principal executive officer of TNE Advisers is
Frederick K. Zimmermann; Mr. Zimmermann and John F. Guthrie, Jr. are the
company's directors. Mr. Guthrie is Senior Vice President of TNE Advisers. Mr.
Zimmermann's principal occupation is Executive Vice President and Chief
Investment Officer of NELICO, and Mr. Guthrie's principal occupation is Vice
President of NELICO. The address of TNE Advisers, New England Life Holdings,
Inc., NELICO and Messrs. Zimmermann and Guthrie is 501 Boylston Street,
Boston, Massachusetts 02116. The address of MetLife and MetLife Holdings is
One Madison Avenue, New York, New York 10010.
11
<PAGE>
INFORMATION ABOUT MSAM
MSAM is a wholly-owned subsidiary of Morgan Stanley, one of the world's
leading investment banking firms. MSAM offers investment management and named
fiduciary services to taxable and tax-exempt funds and institutions, insurance
companies, investment companies, international organizations and individuals
investing in equity and fixed-income securities on a worldwide basis. The
address of MSAM is 1221 Avenue of the Americas, New York, New York 10020.
Certain information regarding MSAM's directors and principal executive
officers is set forth below:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
NAME AND ADDRESS POSITION WITH MSAM OTHER INFORMATION
- ---------------- ------------------ ------------------------
<S> <C> <C>
Barton M. Biggs Chairman, Director Managing Director of
and Managing Morgan Stanley & Co.;
Director Chairman of Morgan
Stanley Asset Management
Limited
Peter A. Nadosy Vice Chairman, Managing Director of
Director and Morgan Stanley & Co.;
Managing Director Director of Morgan
Stanley Asset Management
Limited
James M. Allwin President, Director Managing Director of
and Managing Morgan Stanley & Co.;
Director President of Morgan
Stanley Realty Inc.
Gordon S. Gray Director and Managing Director of
Managing Director Morgan Stanley & Co.
Dennis G. Sherva Director and Managing Director of
Managing Director Morgan Stanley & Co.
</TABLE>
The address of each of the foregoing individuals is 1221 Avenue of the
Americas, New York, New York 10020.
MSAM is investment adviser (or sub-adviser, in the case of the funds marked
with an asterisk below) to the following other mutual funds that have similar
investment objectives to the Series, for compensation at the annual fee rates
of the corresponding average net asset levels of those funds set forth in the
table below. The table also sets forth the net assets of those other funds at
December 31, 1996.
<TABLE>
<CAPTION>
NET ASSETS OF
OTHER FUND
OTHER FUND WITH (IN MILLIONS)
SIMILAR OBJECTIVE ON 12/31/96 ANNUAL FEE RATE
----------------- ------------- ---------------
<S> <C> <C>
Morgan Stanley $108.46 0.80% of average daily net
Institutional assets(1)
Fund, Inc.--
International
Magnum Portfolio
Morgan Stanley Fund, $ 16.49 0.80% of average daily net
Inc.--International assets(2)
Magnum Fund
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
NET ASSETS OF
OTHER FUND
OTHER FUND WITH (IN MILLIONS)
SIMILAR OBJECTIVE ON 12/31/96 ANNUAL FEE RATE
----------------- ------------- ---------------
<S> <C> <C>
Morgan Stanley Universal $ 0 0.80% of average daily net
Funds, Inc.-- assets on first $500
International million, 0.75% of average
Magnum Portfolio(3) daily net assets from $500
million to $1 billion, and
0.70% of average daily net
assets over $1 billion (4)
Morgan Stanley $183.86 0.65% of average daily net
Institutional assets (5)
Fund, Inc.--Active
Country Allocation
Portfolio
Morgan Stanley $2,269.49 0.80% of average daily net
Institutional assets (6)
Fund, Inc.--
International
Equity Portfolio
American AAdvantage $151.75 0.80% of average daily net
International Equity assets on the first $25
Fund* million, 0.60% of average
daily net assets on the next
$25 million, 0.50% of
average daily net assets on
the next $25 million, and
0.40% of average daily net
assets in excess of $75
million
Fountain Square $138.91 0.50% of average daily net
International Equity assets
Fund*
Sun America Series $163.47 0.65% of average daily net
Trust--International assets on the first $350
Diversified million, and 0.60% of
Equities Portfolio* average daily net assets in
excess of $350 million
</TABLE>
- -----------
(1) MSAM has agreed to waive its advisory fees and/or to reimburse this fund,
if necessary, if such fees would cause the fund's total annual operating
expenses, as a percentage of average daily net assets, to exceed 1.00% of
Class A shares and 1.25% of Class B shares.
(2) MSAM has agreed to waive its advisory fees and/or to reimburse this fund,
if necessary, if such fees would cause the fund's total annual operating
expenses, as a percentage of average daily net assets, to exceed 1.65% of
Class A shares, 2.40% of Class B shares and 2.40% of Class C shares.
(3) This fund had not commenced operations as of December 31, 1996.
(4) MSAM has agreed to waive its advisory fees and/or to reimburse this fund,
if necessary, if such fees would cause the fund's total annual operating
expenses, as a percentage of average daily net assets, to exceed 1.15%.
(5) MSAM has agreed to waive its advisory fees and/or to reimburse this fund,
if necessary, if such fees would cause the fund's total annual operating
expenses, as a percentage of average daily net assets, to exceed 0.80% of
Class A shares and 1.05% of Class B shares.
(6) MSAM has agreed to waive its advisory fees and/or to reimburse this fund,
if necessary, if such fees would cause the fund's total annual operating
expenses, as a percentage of average daily net assets, to exceed 1.00% of
Class A shares and 1.25% of Class B shares.
13
<PAGE>
INFORMATION ABOUT MORGAN STANLEY
Morgan Stanley is a publicly owned global financial services corporation
whose stock is traded on the New York, London and Pacific Stock Exchanges.
Morgan Stanley and various of its directly or indirectly owned subsidiaries,
including Morgan Stanley & Co. and Morgan Stanley International, provide a
wide range of financial services on a global basis. Their principal businesses
include securities underwriting, distribution and trading; merger,
acquisition, restructuring, real estate, project finance and other corporate
finance advisory activities; merchant banking and other principal investment
activities; stock brokerage and research services; asset management; the
trading of foreign exchange and commodities as well as derivatives on a broad
range of asset categories, rates and indices; real estate advice, financing
and investing; and global custody, securities clearance services and
securities lending. Morgan Stanley's principal address is 1585 Broadway, New
York, New York 10036.
INFORMATION ABOUT DEAN WITTER DISCOVER
Dean Witter Discover is a diversified financial services company offering a
broad range of nationally marketed credit and investment products with a
primary focus on individual customers. Dean Witter Discover has two principal
lines of business: credit services and securities. Its credit services
business consists primarily of the issuance, marketing and servicing of
general purpose credit cards and the provision of transaction processing
services, private-label credit card services and real estate secured loans.
Dean Witter Discover's securities business is conducted primarily through its
wholly-owned subsidiaries, DWR and Dean Witter InterCapital Inc.
("InterCapital"). DWR is a full-service securities firm offering a wide
variety of securities products to serve the investment needs of its individual
clients. DWR is a member of the New York Stock Exchange and of other major
securities, futures and options exchanges. InterCapital is a registered
investment adviser that, along with its subsidiaries, provides advisory
services to investment companies, individual accounts and institutional
portfolios.
PORTFOLIO TRANSACTIONS AND BROKERAGE
If the New Sub-Advisory Agreement is approved, MSAM would expect to follow
the practices described below with respect to the portfolio transactions of
the Series.
MSAM places orders with broker-dealers for securities to be purchased by the
Series. The primary objective of MSAM in choosing brokers for the purchase and
sale of securities for the Series' portfolio is to obtain the most favorable
net results, taking into account such factors as price, commission, size of
order, difficulty of execution and the degree of skill required of the broker-
dealer. The capability and financial condition of the broker may also be
criteria for the choice of that broker. The placing and execution of orders
for the Series is also subject to restrictions
14
<PAGE>
under U.S. securities laws, including certain prohibitions against trading
among the Series and its affiliates (including MSAM and its affiliates). The
Series may utilize affiliates of MSAM in connection with the purchase or sale
of securities in accordance with rules or exemptive orders adopted by the
Securities and Exchange Commission (the "SEC") when MSAM believes that the
charge for the transaction does not exceed usual and customary levels. In
addition, the Series may purchase securities in a placement for which
affiliates of MSAM have acted as agent to or for issuers, consistent with
applicable rules adopted by the SEC or regulatory authorization, if necessary.
The Series will not purchase securities from or sell securities to any
affiliate of MSAM acting as principal.
MSAM on behalf of the Series may place brokerage transactions through
brokers who provide MSAM with investment research services, including market
and statistical information and quotations for portfolio valuation purposes.
The terms "investment research" and "market and statistical information and
quotations" include advice as to the value of securities, the advisability of
investing in, purchasing or selling securities and the availability of
securities and potential buyers or sellers of securities, as well as the
furnishing of analyses and reports concerning issuers, industries, securities,
economic factors and trends and portfolio strategy, each and all as consistent
with those services mentioned in Section 28(e) of the Securities Exchange Act
of 1934, as amended.
Research provided to MSAM in advising the Series is in addition to and not
in lieu of the services required to be performed by MSAM itself, and MSAM's
fees will not be reduced as a result of the receipt of such supplemental
information. It is the opinion of the management of MSAM that such information
is only supplementary to MSAM's own research efforts, since the information
must still be analyzed, weighed and reviewed by MSAM's staff. Such information
may be useful to MSAM in providing services to clients other than the Series,
and not all such information is necessarily used by MSAM in connection with
the Series. Conversely, information provided to MSAM by brokers and dealers
through whom other clients of MSAM effect securities transactions may prove
useful to MSAM in providing services to the Series.
BROKERAGE TRANSACTIONS WITH AFFILIATES
MSAM may, if the New Sub-Advisory Agreement is approved, cause the Series to
pay brokerage commissions to an affiliated broker for acting as agent on
purchases and sales of securities for the portfolio of the Series. SEC rules
require that commissions paid to an affiliated broker of an adviser or sub-
adviser to a mutual fund for portfolio transactions not exceed "usual and
customary" brokerage commissions. The rules define "usual and customary"
commissions to include amounts which are "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection
15
<PAGE>
with comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time." The
Trustees, including those who are not "interested persons" of the Trust, have
adopted procedures for evaluating the reasonableness of commissions paid to
affiliated brokers and will review these procedures periodically. During the
fiscal year ended December 31, 1996, the Series did not pay any brokerage
commissions to DWR or to any broker then affiliated with the Series' adviser
or sub-adviser, but paid $39,438 in commissions to Morgan Stanley & Co.
TRUSTEE ACTION; REQUIRED SHAREHOLDER VOTE
At a meeting held on January 22, 1997, the Trustees of the Trust voted
unanimously to approve the New Sub-Advisory Agreement and to approve the
termination of the Current Sub-Advisory Agreement, effective at such time as
the New Sub-Advisory Agreement becomes effective. If shareholders approve the
New Sub-Advisory Agreement, it is expected to become effective on or about May
1, 1997.
At a meeting held on March 4, 1997, the Trustees of the Trust voted
unanimously (i) to confirm their approval of the New Sub-Advisory Agreement in
light of information about the Merger and Dean Witter Discover which was
presented to the Trustees at such meeting, and (ii) to approve the Post-Merger
Sub-Advisory Agreement. If shareholders approve the Post-Merger Sub-Advisory
Agreement, it would take effect at the time of the Merger, replacing the New
Sub-Advisory Agreement.
The required vote for approval of each of the New Sub-Advisory Agreement and
the Post-Merger Sub-Advisory Agreement is the lesser of (1) 67% of the
outstanding shares of the Series represented at the Meeting, if more than 50%
of the outstanding shares of the Series are represented at the Meeting, or (2)
more than 50% of the outstanding shares of the Series. If the shareholders of
the Series do not approve the New Sub-Advisory Agreement, the Trustees will
consider such alternative arrangements for the management of the Series'
portfolio as may be in the best interests of the Series. If the Merger occurs
but the shareholders of the Series do not approve the Post-Merger Sub-Advisory
Agreement, then the Trustees will consider whether it remains appropriate to
retain MSAM as sub-adviser to the Series and whether any additional actions
may be in the best interests of the Series. The Post-Merger Sub-Advisory
Agreement will not take effect unless both it and the New Sub-Advisory
Agreement have been approved by shareholders.
THE TRUSTEES OF THE TRUST UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS VOTE TO
APPROVE BOTH THE PROPOSED NEW SUB-ADVISORY AGREEMENT AND THE PROPOSED POST-
MERGER SUB-ADVISORY AGREEMENT.
16
<PAGE>
OWNERSHIP OF SHARES AND VOTING INFORMATION
As of the Record Date, all of the shares of the Series were owned by either:
(1) New England Variable Life Separate Account ("NEVL Separate Account"), a
separate account of NELICO, which is an indirect wholly-owned life insurance
subsidiary of MetLife; (2) The New England Variable Account, a separate
account of MetLife; (3) New England Variable Annuity Separate Account ("NEVA
Separate Account"), a separate account of NELICO; (4) certain separate
accounts of MetLife established for the pooling of contributions under certain
tax-qualified group annuity contracts ("MetLife Group Separate Accounts"); or
(5) certain separate accounts of NELICO established for the pooling of
contributions under certain tax-qualified group annuity contracts ("NELICO
Group Separate Accounts"). The shares and percentage of the Series held by
these entities is set forth below:
<TABLE>
<CAPTION>
NUMBER % OF
SHAREHOLDER OF SHARES OUTSTANDING
----------- ------------- -----------
<S> <C> <C>
NEVL Separate Account............................ 479,677.517 13.57%
501 Boylston Street
Boston, MA 02116
The New England Variable Account................. 1,529,001.072 43.27%
One Madison Avenue
New York, NY 10010
NEVA Separate Account............................ 1,399,737.010 39.61%
501 Boylston Street
Boston, MA 02116
MetLife Group Separate Accounts.................. 122,153.090 3.46%
One Madison Avenue
New York, NY 10010
NELICO Group Separate Accounts................... 3,147.055 0.09%
501 Boylston Street
Boston, MA 02116
Totals......................................... 3,533,715.744 100.00%
</TABLE>
As of the Record Date, the officers and Trustees of the Trust as a group
owned beneficially less than 1% of the outstanding shares of the Series.
The Trust is subject to special voting provisions. As of the Record Date,
the Trust served as an investment vehicle for use only in connection with (1)
variable life insurance contracts offered by NELICO and (2) certain variable
annuity contracts, including group annuity contracts, of MetLife and NELICO.
All shares of the Series owned by NEVL Separate Account and NEVA Separate
Account are
17
<PAGE>
attributable to variable life insurance policies and variable annuity
contracts issued by NELICO or to charges assessed by NELICO against those
policies and contracts. NELICO has agreed that each owner of such a policy or
contract (an "Owner") will be permitted to instruct NELICO as to how shares of
the Trust attributable to the policies or contracts owned by such Owner should
be voted at meetings of Trust shareholders. With respect to each of these
separate accounts, all shares of the Series attributable to such policies and
contracts for which no Owner instructions have been received by NELICO and all
shares of the Series attributable to charges assessed by NELICO against such
policies and contracts will be voted for, voted against or withheld from
voting on any proposal in the same proportions as are the shares for which
Owner instructions have been received by NELICO with respect to policies or
contracts issued by such separate account. All shares of the Series held by
The New England Variable Account are attributable to variable annuity
contracts of MetLife or to charges assessed by MetLife against such contracts.
The holder of each such contract (a "Contractholder") has the right to
instruct MetLife as to how to vote the shares of the Trust attributable to
such contract. All shares of the Series held by The New England Variable
Account for which no Contractholder instructions have been received by MetLife
and any shares of the Series attributable to charges assessed by MetLife
against variable annuity contracts will be voted for, voted against or
withheld from voting on any proposal in the same proportions as are the shares
for which Contractholder instructions have been received by MetLife. All
shares of the Series held by MetLife Group Separate Accounts or NELICO Group
Separate Accounts will be voted for, voted against or withheld from voting on
any proposal in the same proportion as the aggregate of (i) the shares for
which voting instructions are received and (ii) the shares that are voted in
proportion to such voting instructions.
CERTAIN TRUSTEES AND OFFICERS OF THE TRUST
The following persons are both officers or Trustees of the Trust and
officers, directors or employees of TNE Advisers: Frederick K. Zimmermann,
John F. Guthrie, Jr., Beverly J. DeWitt and Alan C. Leland, Jr.
OTHER MATTERS
The holders of forty percent of the shares of the Series outstanding on the
Record Date, present in person or represented by proxy, constitute a quorum
for the transaction of business at the Meeting, although it is necessary for
at least a majority of the shares of the Series to be represented at the
Meeting in order for the New Sub-Advisory Agreement and the Post-Merger Sub-
Advisory Agreement to be approved. Votes cast by proxy or in person at the
Meeting will be counted by persons appointed by the Trust as tellers for the
Meeting. The tellers will count the total number of votes cast "for" approval
of each Proposal for purposes of determining whether sufficient affirmative
votes have been cast. The tellers will
18
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count all shares represented by proxies that reflect abstentions and "broker
non-votes" (i.e., shares held by brokers or nominees as to which instructions
have not been received from the beneficial owners or the persons entitled to
vote) for purposes of determining the presence of a quorum. Assuming the
presence of a quorum, abstentions and broker non-votes have the effect of a
negative vote on each Proposal.
In the event that a quorum is not present for purposes of acting on each
Proposal, or if sufficient votes in favor of each Proposal are not received by
April 24, 1997, the persons named as proxies may vote on these matters for
which a quorum is present and as to which sufficient votes have been received,
and may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative
vote of a majority of the shares present in person or represented by proxy at
the session of the Meeting to be adjourned. The persons named as proxies will
vote in favor of such adjournment those proxies which they are entitled to
vote in favor of Proposals 1 and 2. They will vote against any such
adjournment those proxies required to be voted against either Proposal and
will not vote any proxies that direct them to abstain from voting on such
Proposals.
Although the Meeting is called to transact any other business that may
properly come before it, the only business that management intends to present
or knows that others will present is Proposals 1 and 2 mentioned in the Notice
of Special Meeting. However, you are being asked on the enclosed proxy to
authorize the persons named therein to vote in accordance with their judgment
with respect to any additional matters which properly come before the Meeting,
and on all matters incidental to the conduct of the Meeting.
SHAREHOLDER PROPOSALS AT FUTURE MEETINGS
The Trust does not hold annual or other regular meetings of shareholders.
Shareholder proposals to be presented at any future meeting of shareholders of
the Trust must be received by the Trust at a reasonable time before the
Trust's solicitation of proxies for that meeting in order for such proposals
to be considered for inclusion in the proxy materials relating to that
meeting.
March 20, 1997
19
<PAGE>
APPENDIX A
SUB-ADVISORY AGREEMENT
MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES
This Sub-Advisory Agreement (this "Agreement") is entered into as of May 1,
1997 by and among TNE Advisers, Inc., a Massachusetts corporation (the
"Manager"), and Morgan Stanley Asset Management Inc., a Delaware corporation
(the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated August 30,
1996 (the "Advisory Agreement") with New England Zenith Fund (the "Trust"),
pursuant to which the Manager provides portfolio management and administrative
services to the Morgan Stanley International Magnum Equity Series of the Trust
(the "Series");
WHEREAS, the Advisory Agreement provides that the Manager may delegate any
or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager desires to retain the Sub-Adviser to render portfolio
management services in the manner and on the terms set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, the Manager and the Sub-Adviser agree as follows:
1. SUB-ADVISORY SERVICES.
a. The Sub-Adviser shall, subject to the supervision of the Manager and in
cooperation with any administrator appointed by the Manager (the
"Administrator"), manage the investment and reinvestment of the assets of the
Series. The Sub-Adviser shall manage the Series in conformity with (1) the
investment objective, policies and restrictions of the Series set forth in the
Trust's prospectus and statement of additional information relating to the
Series, (2) any additional policies or guidelines established by the Manager
or by the Trust's trustees that have been furnished in writing to the Sub-
Adviser and (3) the provisions of the Internal Revenue Code (the "Code")
applicable to "regulated investment companies" (as defined in Section 851 of
the Code) and Section 817 of the Code, all as from time to time in effect
(collectively, the "Policies"), and with all applicable provisions of law,
including without limitation all applicable provisions of the Investment
Company Act of 1940 (the "1940 Act") and the rules and regulations thereunder.
Subject to the foregoing, the Sub-Adviser is authorized, in its discretion and
without prior consultation with the Manager, to buy, sell, lend and otherwise
trade in any stocks, bonds and other securities and investment instruments on
behalf of the Series, without regard to the length of time the securities have
been held and the resulting rate of portfolio turnover or any tax
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considerations; and the majority or the whole of the Series may be invested in
such proportions of stocks, bonds, other securities or investment instruments,
or cash, as the Sub-Adviser shall determine. Notwithstanding the foregoing
provisions of this Section 1.a, however, the Sub-Adviser shall, upon written
instructions from the Manager, effect such portfolio transactions for the
Series as the Manager shall determine are necessary in order for the Series to
comply with the Policies.
b. The Sub-Adviser shall furnish the Manager and the Administrator monthly,
quarterly and annual reports concerning transactions and performance of the
Series in such form as may be mutually agreed upon, and agrees to review the
Series and discuss the management of the Series with representatives or agents
of the Manager, the Administrator or the Trust at their reasonable request.
The Sub-Adviser shall permit all books and records with respect to the Series
to be inspected and audited by the Manager and the Administrator at all
reasonable times during normal business hours, upon reasonable notice. The
Sub-Adviser shall also provide the Manager, the Administrator or the Trust
with such other information and reports as may reasonably be requested by the
Manager, the Administrator or the Trust from time to time, including without
limitation all material as reasonably may be requested by the Trustees of the
Trust pursuant to Section 15(c) of the 1940 Act.
c. The Sub-Adviser shall provide to the Manager a copy of its Form ADV as
filed with the Securities and Exchange Commission and as amended from time to
time and a list of the persons whom the Sub-Adviser wishes to have authorized
to give written and/or oral instructions to custodians of assets of the
Series.
2. OBLIGATIONS OF THE MANAGER.
a. The Manager shall provide (or cause the Trust's custodian to provide)
timely information to the Sub-Adviser regarding such matters as the
composition of assets of the Series, cash requirements and cash available for
investment in the Series, and all other information as may be reasonably
necessary for the Sub-Adviser to perform its responsibilities hereunder.
b. The Manager has furnished the Sub-Adviser a copy of the prospectus and
statement of additional information of the Series and agrees during the
continuance of this Agreement to furnish the Sub-Adviser copies of any
revisions or supplements thereto at, or, if practicable, before the time the
revisions or supplements become effective. No revisions shall be made nor
supplements issued regarding the Series or the Sub-Adviser without the prior
review and approval of the Sub-Adviser. No written materials naming or
relating to the Sub-Adviser, its employees or its affiliated companies, other
than materials provided or approved by the Sub-Adviser, shall be used by the
Manager, the Trust or their affiliates in offering or marketing shares of the
Trust or related variable insurance products. The Manager agrees to furnish
the Sub-Adviser with minutes of meetings of the Trustees of the Trust
applicable to the Series to the extent they may affect the
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<PAGE>
duties of the Sub-Adviser, and with copies of any financial statements or
reports made by the Series to its shareholders, and any further materials or
information which the Sub-Adviser may reasonably request to enable it to
perform its functions under this Agreement.
3. CUSTODIAN. The Manager shall provide the Sub-Adviser with a copy of the
Series' agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Series shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions
of the Custodian, unless such act or omission is required by and taken in
reliance upon instruction given to the Custodian by a representative of the
Sub-Adviser properly authorized to give such instruction under the Custody
Agreement. Any assets added to the Series shall be delivered directly to the
Custodian.
4. EXPENSES. Except for expenses specifically assumed or agreed to be paid
by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any expenses of the Manager or the Trust including, without limitation, (a)
interest and taxes, (b) brokerage commissions and other costs in connection
with the purchase or sale of securities or other investment instruments with
respect to the Series, and (c) custodian fees and expenses. The Sub-Adviser
will pay its own expenses incurred in furnishing the services to be provided
by it pursuant to this Agreement.
5. PURCHASE AND SALE OF ASSETS. Absent instructions from the Manager to the
contrary, the Sub-Adviser shall place all orders for the purchase and sale of
securities for the Series with brokers or dealers selected by the Sub-Adviser,
which may include brokers or dealers affiliated with the Sub-Adviser, provided
such orders comply with Rule 17e-1 under the 1940 Act in all respects. To the
extent consistent with applicable law, purchase or sell orders for the Series
may be aggregated with contemporaneous purchase or sell orders of other
clients of the Sub-Adviser. The Sub-Adviser shall use its best efforts to
obtain execution of transactions for the Series at prices which are
advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received.
6. COMPENSATION OF THE SUB-ADVISER. As full compensation for all services
rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Manager shall pay the Sub-Adviser compensation at the annual
rate of 0.75% of the first $30 million of the average daily net assets of the
Series, 0.60% of the next $40 million of such assets, 0.45% of the next $30
million of such assets and 0.40% of such assets in excess of $100 million.
Such compensation shall be payable
A-3
<PAGE>
monthly in arrears or at such other intervals, not less frequently than
quarterly, as the Manager is paid by the Series pursuant to the Advisory
Agreement. The Manager may from time to time waive the compensation it is
entitled to receive from the Trust, however, and such waiver will have no
effect on the Manager's obligation to pay the Sub-Adviser the compensation
provided for herein.
7. NON-EXCLUSIVITY. The Manager and the Series agree that the services of
the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other
services to various investment companies and other managed accounts, except as
the Sub-Adviser and the Manager or the Administrator may otherwise agree from
time to time in writing before or after the date hereof. This Agreement shall
not in any way limit or restrict the Sub-Adviser or any of its directors,
officers, employees or agents from buying, selling or trading any securities
or other investment instruments for its or their own account or for the
account of others for whom it or they may be acting, provided that such
activities do not adversely affect or otherwise impair the performance by the
Sub-Adviser of its duties and obligations under this Agreement. The Manager
and the Series recognize and agree that the Sub-Adviser may provide advice to
or take action with respect to other clients, which advice or action,
including the timing and nature of such action, may differ from or be
identical to advice given or action taken with respect to the Series. The Sub-
Adviser shall for all purposes hereof be deemed to be an independent
contractor and shall, unless otherwise provided or authorized, have no
authority to act for or represent the Trust or the Manager in any way or
otherwise be deemed an agent of the Trust or the Manager.
8. LIABILITY. Except as may otherwise be provided by the 1940 Act or other
federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, employees or agents (the "Indemnified Parties") shall be subject to
any liability to the Manager, the Trust, the Series or any shareholder of the
Series for any error of judgment, any mistake of law or any loss arising out
of any investment or other act or omission in the course of, connected with,
or arising out of any service to be rendered under this Agreement, except by
reason of willful misfeasance, bad faith or gross negligence in the
performance of the Sub-Adviser's duties or by reason of reckless disregard by
the Sub-Adviser of its obligations and duties. The Manager shall hold harmless
and indemnify the Sub-Adviser for any loss, liability, cost, damage or expense
(including reasonable attorneys fees and costs) arising from any claim or
demand by any past or present shareholder of the Series that is not based upon
the obligations of the Sub-Adviser with respect to the Series under this
Agreement. The Manager acknowledges and agrees that the Sub-Adviser makes no
representation or warranty, express or implied, that any level of performance
or investment results will be achieved by the Series or that the Series will
perform comparably with any standard or index, including other clients of the
Sub-Adviser, whether public or private.
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<PAGE>
9. EFFECTIVE DATE AND TERMINATION. This Agreement shall become effective as
of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue in effect
for two years from the date of execution, and from year to year thereafter
so long as such continuance is specifically approved at least annually (i)
by the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Series, and (ii) by vote of a
majority of the trustees of the Trust who are not interested persons of
the Trust, the Manager or the Sub-Adviser, cast in person at a meeting
called for the purpose of voting on such approval;
b. this Agreement may at any time be terminated on sixty days' written
notice to the Sub-Adviser either by vote of the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
Series;
c. this Agreement shall automatically terminate in the event of its
assignment or upon the termination of the Advisory Agreement;
d. this Agreement may be terminated by the Sub-Adviser on sixty days'
written notice to the Manager and the Trust, or, if approved by the Board
of Trustees of the Trust, by the Manager on sixty days' written notice to
the Sub-Adviser; and
e. if the Sub-Adviser requires the Series to change its name so as to
eliminate all references to the words "Morgan Stanley" then this Agreement
shall automatically terminate at the time of such change unless the
continuance of this Agreement after such change shall have been
specifically approved by vote of a majority of the outstanding voting
securities of the Series and by vote of a majority of the Trustees of the
Trust who are not interested persons of the Trust or the Sub-Adviser, cast
in person at a meeting called for the purpose of voting on such approval.
Termination of this Agreement pursuant to this Section 9 shall be without
the payment of any penalty.
10. AMENDMENT. This Agreement may be amended at any time by mutual consent
of the parties, provided that, if required by law, such amendment shall also
have been approved by vote of a majority of the outstanding voting securities
of the Series and by vote of a majority of the trustees of the Trust who are
not interested persons of the Trust, the Manager or the Sub-Adviser, cast in
person at a meeting called for the purpose of voting on such approval.
11. CERTAIN DEFINITIONS. For the purpose of this Agreement, the terms "vote
of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under the 1940 Act.
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<PAGE>
12. GENERAL.
a. The Sub-Adviser may perform its services through any employee,
officer or agent, and the Manager shall not be entitled to the advice,
recommendation or judgment of any specific person; provided, however, that
the persons identified in the prospectus of the Series shall perform the
portfolio management duties described therein until the Sub-Adviser
notifies the Manager that one or more other employees, officers or agents
identified in such notice shall assume such duties as of a specific date.
b. If any term or provision of this Agreement or the application thereof
to any person or circumstances is held to be invalid or unenforceable to
any extent, the remainder of this Agreement or the application of such
provision to other persons or circumstances shall not be affected thereby
and shall be enforced to the fullest extent permitted by law.
c. This Agreement shall be governed by and interpreted in accordance
with the laws of the Commonwealth of Massachusetts.
13. USE OF MORGAN STANLEY NAME. The Manager and the Trust agree that if this
Agreement is terminated and the Sub-Adviser or an affiliate thereof shall no
longer be the sub-adviser to the Series, the Trust will change the name of the
Series to delete any reference to "Morgan Stanley."
TNE Advisers, Inc.
By: ___________________________________
John F. Guthrie, Jr.
Senior Vice President
Morgan Stanley Asset Management Inc.
By: ___________________________________
Name:
Title:
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<PAGE>
INSTRUCTION FORM
THE PROXY TO WHICH THESE INSTRUCTIONS RELATE IS SOLICITED ON BEHALF OF THE
TRUSTEES OF NEW ENGLAND ZENITH FUND
The undersigned hereby instructs that all shares of the Draycott International
Equity Series of New England Zenith Fund deemed attributable to the
undersigned's contracts with the issuing insurance company be voted at the
Special Meeting of Shareholders of the Series on April 24, 1997 (the Notice and
Proxy Statement with respect to which have been received by the undersigned),
and at all adjournments thereof, on each proposal described in said Notice as
set forth on the reverse side hereof.
The issuing insurance company is authorized to vote in its discretion on any
other matters which may properly come before the meeting.
YOUR VOTE IS IMPORTANT. Please vote as soon as possible
* * * PLEASE SEE REVERSE SIDE * * *
<PAGE>
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE FOR THE ITEMS BELOW
- -------------------------------------------------------------------------------
1. To approve a proposed Sub-Advisory Agreement between TNE Advisers, Inc.
and Morgan Stanley Asset Management Inc.
[_] For [_] Against [_] Abstain
2. To approve a proposed Sub-Advisory Agreement between TNE Advisers, Inc. and
Morgan Stanley Asset Management Inc. to be effective upon the merger of
Morgan Stanley Group Inc. with and into Dean Witter, Discover & Co., such
Sub-Advisory Agreement to be identical, except for its date, to the
Sub-Advisory Agreement in effect immediately prior to such merger.
[_] For [_] Against [_] Abstain
If this form is signed and returned with no choice indicated as to any
proposal above, such shares shall be voted FOR such proposal.
- -------------------------------------------------------------------------------
* * * IF YOU WISH TO VOTE BY TELEPHONE, PLEASE READ THE INSTRUCTIONS
BELOW. * * *
- -------------------------------------------------------------------------------
DATE / /1997
---------------
----------------------------
SIGNATURE
----------------------------
SIGNATURE, IF JOINTLY HELD
IF ACTING AS ATTORNEY,
EXECUTOR, TRUSTEE OR IN
OTHER REPRESENTATIVE
CAPACITY, PLEASE SIGN
NAME AND TITLE.
* * * PLEASE FOLD AND DETACH HERE AND READ THE REVERSE SIDE * * *
YOUR VOTE IS IMPORTANT
.On a Touch Tone Telephone - Call TOLL FREE 1-888-776-5660 24 hours per
day, 7 days a week
You will hear these instructions:
"You may make your selection at any time. To
vote For, Press 1; Against, Press 9; Abstain,
Press 0."
.You will be asked to enter a control number which is
[ ]
-------------
YOUR VOTE SELECTION WILL BE REPEATED AND YOU WILL HAVE AN OPPORTUNITY TO
CONFIRM IT.
- --------------------------------------------------------------------------------
IF YOU VOTE BY TELEPHONE, THERE IS NO NEED FOR YOU TO MAIL BACK YOUR PROXY.
THANK YOU FOR VOTING.
- --------------------------------------------------------------------------------
<PAGE>
INSTRUCTION FORM
THE PROXY TO WHICH THESE INSTRUCTIONS RELATE IS SOLICITED ON BEHALF OF THE
TRUSTEES OF NEW ENGLAND ZENITH FUND
The undersigned hereby instructs that all shares of the Draycott International
Equity Series of New England Zenith Fund deemed attributable to the
undersigned's contracts with the issuing insurance company be voted at the
Special Meeting of Shareholders of the Series on April 24, 1997 (the Notice and
Proxy Statement with respect to which have been received by the undersigned),
and at all adjournments thereof, on each proposal described in said Notice as
set forth on the reverse side hereof.
The issuing insurance company is authorized to vote in its discretion on any
matters which may properly come before the meeting.
YOUR VOTE IS IMPORTANT. PLEASE VOTE AS SOON AS POSSIBLE.
* * * PLEASE SEE REVERSE SIDE * * *
<PAGE>
- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE FOR THE ITEMS BELOW
- --------------------------------------------------------------------------------
1. To approve a proposed Sub-Advisory Agreement between TNE Advisers, Inc.
and Morgan Stanley Asset Management.
[_] For [_] Against [_] Abstain
2. To approve a proposed Sub-Advisory Agreement between TNE Advisers, Inc. and
Morgan Stanley Asset Management Inc. to be effective upon the merger of
Morgan Stanley Group Inc. with and into Dean Witter, Discover & Co., such
Sub-Advisory Agreement to be identical, except for its date, to the
Sub-Advisory Agreement in effect immediately prior to such merger.
[_] For [_] Against [_] Abstain
If this form is signed and returned with no choice indicated as to any
proposal above, such shares shall be voted FOR such proposal.
DATE / /1997
----------------
--------------------------------
SIGNATURE
--------------------------------
SIGNATURE, IF JOINTLY HELD
If acting as Attorney,
Executor, Trustee or in other
representative capacity, please
sign name and title
PLEASE READ THE REVERSE SIDE
